Pertamina denies contempt of court despite US ruling
Friday, April 5 2002 - 09:10 AM WIB
The US district court in Houston, Texas, on Tuesday declared Pertamina in contempt for asking a Jakarta court to halt worldwide enforcement of the judgment in favour of US-controlled power firm Karaha Bodas.
"It is not that we are in contempt of a court ruling," said Pertamina spokesman Ridwan Nyak Baik.
"The ruling contravenes the joint operation contract agreement made with Karaha Bodas. There's a clause in the contract that a dispute between the two sides should be settled under Indonesian law," he told AFP.
Karaha Bodas was awarded the damages by Swiss arbitrators in December 2000 over a suspended power project. A US federal court confirmed the award.
Karaha Bodas says it has begun seizing Pertamina's assets in the United States and two banks have now frozen more than US$200 million.
Pertamina this week won an injunction from Central Jakarta district court to prevent Karaha from recovering its award despite a US court ruling that recourse to a local court would be improper.
The Jakarta court also imposed a US$500,000 a day fine on Karaha, payable to Pertamina.
Legal expert Todung Mulya Lubis told Friday's Jakarta Post that the Jakarta court ruling would further undermine the confidence of foreign investors in Indonesia.
"This will create a negative impact on foreign direct investment because an international arbitration ruling has been annulled by a local court," Lubis said.
He added that the International Monetary Fund and other international institutions would likely question the local court ruling.
Christopher F. Dugan, lawyer for Karaha Bodas, said in a statement the contempt of court ruling "must be another blow to Pertamina's reputation and to Indonesia's attempts to attract foreign investment."
Nyak Baik rejected claims the Indonesian court has no jurisdiction over international arbitration, saying Indonesia had ratified the New York convention on the general principle of arbitration.
"Karaha Bodas' lawyers are waging an international campaign to create public opinion that Pertamina is not respecting a court ruling," he said.
Karaha said it had invested more than US$100 million in developing a geothermal project which was suspended by Indonesia in 1998 at the height of the economic crisis.
The Pertamina spokesman said the project was suspended by the Indonesian government and not by his company.
"What they (Karaha) should have done is renegotiate with Pertamina because the government issued a decree last month on the resumption of suspended projects," he said.
In another legal wrangle involving foreign investors, the South Jakarta district court last month issued a ruling sequestering the assets of PT Kaltim Prima Coal (KPC) after a US$776 million lawsuit filed by the East Kalimantan provincial government.
KPC is equally owned by Anglo-Australian Rio Tinto mining group and British-American energy giant BP Plc. It operates a vast coal mine in East Kalimantan.
The East Kalimantan government accuses KPC of deliberately delaying its obligation to divest its 51 percent stake to local buyers. KPC denies the charge. (*)